In this interview, co-founder of Flutterwave and Andela, and founder/CEO of Future Africa, Iyinoluwa Aboyeji, speaks to Temitayo Jaiyeola on the Nigeria Startup Act, funding issues, challenges of running a startup and other issues
The Startup Bill was recently signed into law by the President, Major General Muhammadu Buhari (retd). Do you see the Startup Act impacting the nation’s startup ecosystem positively?
I think it is really the ‘end of the beginning’. The Nigerian startup ecosystem has been around for a very long time, but only in the last 10 years have we started to attract significant attention from Silicon Valley and global investors. It is a good step in the right direction that we have done a good job of engaging the government to create an act that ensures that the ecosystem and its interest are well taken care of and there is a launch pad for the industry to grow.
It is a good development. It is not a perfect act, but it is a step in the right direction that would evolve over time, particularly because of its structure which is very innovative in nature with the National Council on Innovation and Entrepreneurship.
This has probably paved the way for more inclusive policies going forward too. Because by law, there is this council which is democratically elected by all labelled startups, and which is expected to elect four representatives to the National Council on Innovation and Entrepreneurship. My sense is that if this kind of structure doesn’t end up working, then it must be a question of participation. It would not have anything to do with whether the government provided the avenue for engagement or not.
Now, it is on the ecosystem to engage maturely with the government because there is an opportunity to do so now.
How has the nation’s payment scene transformed over the years?
It has become more sophisticated, and this is a big draw for investments. We have one of the best payment infrastructures in the world which is evidenced in processing times, among others. We are leading the world in instant payment times. The space has also produced quite a number of billion-dollar companies.
How do you think Payment Service Banks will further transform the payment system in the country?
The Payment Service Banks will provide generalised access to more people. That is the baseline. Anything else is left to be seen. But at the very least, more people will have access to financial services products where they engage with brands that they trust.
What growth stage is the nation’s startup scene today?
We are maturing. It is hard to define the growth stage. We are definitely maturing. What next is to do more, which is the most important thing.
The space has changed a lot from how it was when I started. When I started, online payments were roughly about 80 million in complete volume, but now Flutterwave alone almost makes that much in revenue. This means the payment volume has gone up in the billions because the revenue model is that you take just a slice of every payment transaction, which also gives a sense of how much the space has grown.
Funding in the Nigerian tech ecosystem has slowed, showing consistency with what is happening on the global scene. How would startups navigate this period?
Startups should be more focused on products and building their business. It is very important and the starting point. There was an industry before funding came, so I do not think lack of funding will stop the industry. Yes, we have had quite a bit of funding in the last couple of years.
It is important that startups focus on products, and their customers during this period, rather than chasing after funding. I do not think that is the right approach for now, given the funding environment.
During COVID, we had a pull-back in capital and things still continued. I don’t think it is as doomy-like as people are making it seem.
I expect the challenges with the global market to get worse, so we might still have a significant uptake in labour action as we have seen with some startups. This is one of the reasons to focus on the real business that is sustainable, has the potential to make a decent profit, and so on. Without that, there is no business.
Can you walk us through how startup funding works on the continent?
I would be honest, there is no one process, and it works differently for everyone depending on what they are raising and who they are raising from. It is not like applying for funding, it is very much different. But the consistent bit is typically around having a clear problem one is trying to solve and a good story to tell about why it is important for the investor to invest and how they will make a return by funding the solution to that problem.
Also, one has got to have a good mind and be able to build relationships with those who have the money and impress them. Ultimately, there is a need for the right governance and financial controls to deploy the capital appropriately. There are quite a number of things that won’t change, but the process is different for everyone. There is no one process.
A lot of funding on the continent is by foreign investors. How can local investors start to fill the gap more?
With what is happening globally, local investors now have an opportunity to step up and fund more companies because we have a better sense of what is real and what is not. We have a better sense of what is happening on the ground. I think that equation will change.
Can you share some of the things the Future Africa Fund has been able to achieve and its challenges?
We have invested in over a hundred companies and deployed about $10m. More than 40 per cent of our team has women on its founding team. We have returned quite a bit of capital to our investors, and our IRR is in three digits, hovering above 100 per cent. We have actually returned real cash to our investors.
Generally speaking, we have had to build a local capital base. A lot of our fund comes from Africans living in Africa and Nigerians living in Nigeria. But the structures and the system for investment are not very easy to navigate. So, we need to build those out. More products have to be built in that respect. Some of the other challenges have been resolved by the Nigeria Startup Act. Before it, there wasn’t any incentive for angel investors to invest, but now, there is a tax credit for investing in startups. There are a bunch of things that can be done now, that weren’t possible to do before.
There is an argument about female-led startups not getting funded enough. How can we bridge the gap?
I think we need to find and train more female managers. I think that is the best way to bridge the gap. If we empower female fund managers, we would be able to find more female entrepreneurs because they can build relationships. It is easy for people of the same sex to build a relationship. And that is where it starts. If you have more female fund managers, you will get more female entrepreneurs founded.
There have been a lot of issues around corporate governance with regard to Nigerian start-ups. How can startups do better?
Prior to now, there was a dearth of professionals who indeed had the ability to provide the right guidance to startups. People were in positions but didn’t understand the business, and these businesses work differently from what they were used to.
But with more success and more maturity in the market, that is changing. So, there are now very experienced people that startups can bring on their boards. They understand the business and have the experience to guide these businesses properly.
These experienced people will improve corporate governance in the country. It is tough for people who do not understand a business to govern it. Before, you couldn’t get proper boards or people who understood your business. But now that there are more and more successful entrepreneurs who have exited, who have more experience as regards how the technology business works, we would start to have more qualified candidates for boards and things will ultimately improve.
Andela and Flutterwave, two companies you were CEO of, are now unicorns. Can you walk us through how to build a unicorn? And how can we build more unicorns in the ecosystem?
There is no manual for building a unicorn. The idea is to build a business and try as much as possible to keep growing it until it blooms. Also, you are not the one that will value your business as a unicorn, it is outsiders that will do so. The best bet to unicorn status is to build a great business that solves a big problem.
What are some of the challenges of running a startup in Nigeria?
The biggest is talent, people who have done it before. One must really invest in talent. The other really important thing is infrastructure. It is very difficult to find the right infrastructure, especially as one grows and the speed of growth.
That can be challenging. Those are the biggest challenges. Again, we are consistently figuring out ways to surmount them. And of course, the policy environment which again the Nigeria Startup Act resolves.